Does Insurance Go Up
After a Small Accident?
Several factors determine whether your premiums rise after an accident.
When you buy auto insurance, you probably consider the price of the policy as one of the most important factors when making your decisions.
While it is important to find a quality policy that fits into your family's budget, the initial price may be misleading because a change in your driving
record, such as having a small accident, might significantly change the size of the premiums you pay.
Policy Language
o Insurers must file with their state regulatory agencies regarding how they will raise premiums after accidents. This state filing
includes the parameters under which the rates go up, as well as the percentage. Therefore, because insurers are only loosely
guided by state laws and can generally create their own surcharge systems, there is no uniform answer about when and how much
your premiums increase. Some insurers forgive their customers' first accidents, some have a sliding scale of surcharges, and some
simply follow standardized guidelines for the industry. Read your policy language to see how your insurer sets surcharge guidelines.
Negligence
o Generally, if an accident is not your fault, your premiums will remain unaffected. A large accident where you are not responsible has
a smaller impact on your insurance than a small accident for which you are responsible. Some insurers, in states where fault is
attributable, can assign comparative negligence, meaning that each party is partially at fault for the accident. For example, you may
only face a premium surcharge if you are found to be 51 percent or more responsible.
Severity
o According to Insure.com, some states have laws that define chargeable accidents as those where your insurer pays out more than
$500 to $750, depending on the state, after you pay your deductible. In other words, If the total damages are $900 and your
deductible is $500, the insurer payout would only be $400. This would be below a state's chargeable threshold and would not result
in a premium increase for you. This benefits people with higher deductibles because it reduces the chances of small accidents
crossing your state's chargeable threshold.
Amount of Increase
o Again, insurers are generally able to set their own rules regarding premium surcharges. Some, however, follow the Insurance
Services Office guidelines. ISO is a neutral party that sets standards and guidelines for the insurance industry nationwide. ISO
guidelines recommend an increase of 20 percent to 40 percent of an insurer's base rate after a negligent accident. For example, if
the base rate is $600 annually, an accident surcharge might increase the premium by $240. Even if you pay below the base rate,
due to policy bundling or other discounts, the surcharge is calculated by the base rate.